"From a strong developed world base, CRH is growing its presence in emerging regions."
In the early 2000s, CRH commenced a detailed review of Asian markets to identify possible opportunities to enter the building materials sector in this region. Market size and scale, population growth and GDP per capita were identified as key leading indicators for our industry. China, the largest cement market in the world, and India, the second largest, were identified as being of particular interest. With strong population growth in both countries, GDP growth of 7% to 9% p.a. and progressive urbanisation, the development potential was clear and CRH focussed on these two countries as the primary targets for entry into Asian markets.
In February 2007, CRH completed its first transaction in China with the purchase of Harbin Sanling Cement Company (‘Sanling Cement’) in Heilongjiang province, northeast China. This single operation cement plant, with a capacity of 650,000 tonnes per annum, is located approximately 45 km southeast of Heilongjiang’s largest city, Harbin (population: 9 million).
In January 2009, CRH established a more significant position with the acquisition of a 26% associate shareholding in Yatai Building Materials Company, the leading player in China’s northeastern provinces (Heilongjiang, Jilin and Liaoning) and a top 10 cement supplier in China. Yatai Building Materials has strong ambitions to grow and is considered to be a primary consolidator of the cement industry in northeastern China.
In early 2009, Yatai Building Materials operations comprised four integrated cement plants and four separate grinding stations in Jilin and Heilongjiang, with a cement capacity of 14 million tonnes per annum. Since then, Yatai has expanded its market presence by increasing its stake in Tonghua Cement in Liaoning and by acquiring Jinyuan Cement in Jilin. Following these investments, and the completion in 2010 of an extensive capital expenditure programme, the combined cement capacity of the enlarged Yatai Building Materials group will be approximately 21 million tonnes. With excellent assets in a high-growth region, CRH plans to work with its partner to build Yatai Building Materials into a significant vertically integrated building materials group in northeastern China.
In May 2008, CRH entered the Indian building materials market through the acquisition of a 50% stake in My Home Industries Limited (MHIL), a cement producer headquartered in Hyderabad with modern production facilities, strong market positions and excellent reserves in central and eastern Andhra Pradesh. At the time of acquisition, MHIL’s operations consisted of three cement production units at Mellacheruvu in central Andhra Pradesh with an annual production capacity of approximately 3 million tonnes. MHIL has since constructed a new grinding plant at Vishakapatnam on the coast of Andhra Pradesh, increasing annual production to 4.2 million tonnes and expanding its market footprint to include the Orissa and West Bengal markets and has further invested in a captive power plant to ensure security of energy supply. CRH looks forward to further developing this business with our partner as the Indian economy and building materials markets evolve.
Our investment focus in Asia is driven by the creation of both long and short-term shareholder value. As the Chinese and Indian markets develop, more sophisticated construction markets will emerge and, as has been our experience in Eastern Europe, a wide range of value-added construction products will be required, enabling CRH to roll out a broader range of products across the industry.